Lecture 12 Group Medical Expense Benefits: Managed Care Plans Differences from Traditional Plans Current Market Share and Costs Health Maintenance Organizations Preferred-Provider Organizations Point-of-Service Plans Multiple-Option Plans

Differences from Traditional Plans Limited Choice of Medical Providers Factors Affecting Choice –Reputation of managed care plan –Established relationships with physicians –Attitude of employer –Cost –Extent of coverage –Status quo bias Quality of care Recent developments –Accreditation –State Legislation Any Willing Provider Laws Postpartum Stays Emergency Care No Gag Rules

Current Market Share and Costs William M. Mercer Study of Enrollment and Cost of Different Types of Medical Plans for Employees for 1998 Type of Plan Enrollment Cost Traditional indemnity13%$3788 HMO29%$3215 PPO40%$3494 Point of service18%$3573

Health Maintenance Organizations (HMOs) Characteristics of HMOs –Prepaid medical care –Comprehensive care –Delivery of medical services –Cost control Sponsorship –Nonprofit organizations –For profit –Physician-Hospital Organizations (PHOs) HMO Act of 1973 –Requirements for Federal qualification Benefits Rating –Open enrollment periods –Employer contribution levels

Preferred-Provider Organizations (PPOs) Paid on fee-for-service basis (generally) Fees are negotiated in advance Incentives to control utilization Employees not required to use PPO, by given incentives Regulation –Less stringent than for HMOs –One reason for success

Point-of-Service Plans (POS) Combines traditional medical coverage with managed care Employees select provider whenever treatment is needed Different coverage for in or out of network choice –Higher deductibles –Lower coinsurance Types –Open-ended HMO –Gatekeeper PPO Similar to PPO, but with more managed care provisions

Multiple-Option Plans Insurance company or Blue Cross-Blue Shield provide traditional indemnity and HMO and/or PPO under single contract Advantages –Administration –Costs may be lower due to experience rating Federally qualified HMOs not eligible due to restrictions on experience rating